Raising financially savvy children in an increasingly digital society
Print Edition
IT’S never too early to begin teaching children about money management and financial literacy. With the rise of e-wallet services and apps (WeChat Wallet, Alipay and Apple Pay, etc.), the financial world is moving away from cash and plastic and towards digital money. This can be challenging for parents of young children and teens. While digital cash is convenient and easy to use, it also encourages impulsive spending. Another downside is that children may not view digital money as real, which can lead to overspending and debt. As with most life skills, the best way to teach them is to incorporate lessons into everyday life. Here are some simple ways to begin talking about money and teaching your child responsible spending habits and the value of money.
Needs vs wants: This is the foundation for developing good money management skills. Without this, children may have trouble appreciating the difference between luxuries and necessities. Together, make a list of “must-have” items. Then, decide if they are needs or wants.
Budgets: Create a monthly or weekly budget that includes savings and spending. Make a list of the typical things you might expect your child to buy during a typical week or month. Decide together how much is a reasonable allowance based on their needs and the expected savings amount. Then, allow additional funds for wants or luxury items.
Allowances: Set a weekly allowance for younger children and a monthly amount for preteens and teens, based on the budget. Decide whether you will provide the allowance in cash, deposit into an e-wallet, or a combination of both. Have your child write down their daily spending or use an online budgeting system, such as FamZoo. At the end of the allowance period, discuss whether they stayed within the allotted budget or went over. This is a great time to discuss needs versus wants again.
Bank accounts and debit cards: Preteens and teenagers may benefit from having their own bank accounts and/or debit cards. This will provide them with an opportunity to practice real money management in the form of reading online statements, saving, depositing and withdrawing money. A “piggy bank” — a special container to hold money — will work well for younger children. Together set a long term savings goal, such as a new bike or a video game. Decide how much money to set aside each allowance period to meet the goal.
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